5 days ago
India bond traders eye US data, RBI liquidity operation for cues
Indian government bond yields
were largely unchanged in early deals on Thursday, as market participants awaited crucial U.S. jobs data after market hours and measures from the local central bank in response to a widening
banking liquidity surplus
.
The yield on the benchmark 10-year bond was at 6.2830% as of 9:45 a.m. IST, after closing at 6.2892% in the previous session. The five-year 6.75% 2029 bond was at 5.9492% after ending at 5.9522% on Wednesday.
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"It is just a wait-and-watch game for today, before an eventful Friday," a trader with a primary dealership said.
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India bond traders eye US data, RBI liquidity operation for cues
Indian government bond yields remained stable as investors awaited U.S. jobs data and the Reserve Bank of India's response to a growing banking liquidity surplus. Market participants are anticipating potential rate cuts by the Federal Reserve, influenced by weaker economic data. The RBI's liquidity management policy and upcoming bond sales are also key factors affecting market sentiment.
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The U.S.
nonfarm payroll data
for June is due later in the day, and a weaker reading would boost chances of a faster pace of rate cuts from the Federal Reserve.
Currently, there is a 27% probability that the Fed will reduce rates at the end of this month, according to the CME FedWatch tool, while the market has fully priced in a 25 basis point cut in September.
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The odds of a rate cut in July increased after U.S. private payrolls unexpectedly fell in June.
Traders remain focused on the
Reserve Bank of India
's liquidity management policy, after it withdrew 850 billion rupees from the banking system through an operation that is due to mature on Friday.
A follow-up announcement is expected after market hours, with the spotlight on whether the RBI chooses to increase the quantum of withdrawal amid a rising liquidity surplus and a plunge in overnight rates.
New Delhi will sell 320 billion rupees ($3.7 billion) of bonds on Friday, with the supply of longer-term notes likely to challenge investor appetite. RATES India's overnight index swap rates were barely changed, with shallow trading volumes.
The one-year and two-year OIS rates were not yet traded, while the liquid five-year was marginally lower at 5.65%.
